Today's Must Read
Dividends & Buybacks Buoy UPS, High Costs Hurt
PepsiCo (PEP) to Gain From Innovation & Productivity Plans
Tuesday, December 12, 2017
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Facebook (FB), UPS (UPS) and PepsiCo (PEP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Facebook’s shares have outperformed the S&P 500 index over the past year, gaining +48.8% vs. +17.3%. Facebook's efforts in mobile and live videos continue to pay off in a big way. Instagram remains another important revenue stream. Apart from mobile and video, the monetization opportunities of the company’s other subsidiaries – Messenger, WhatsApp and Oculus – and a huge user base/higher engagement levels are expected to drive growth going ahead.
Facebook is also dabbling in AR/VR and AI technologies, which bodes well for long-term growth. However, the recent uproar caused by apparent use of the platform by Russian elements for interfering in the presidential elections has put Facebook in a spot. As a result, Facebook CEO has said that it will make sizable investments to tighten security on the platform, which, along with continued investments in video, AR/VR and AI, will dent operating margins going forward.
Shares of UPS have underperformed the Zacks Air Freight and Cargo industry as well as rival FedEx on a year-to-date basis. While UPS has gained +2.9% of its value, the industry it belongs to and FedEx have rallied +11.6% and +28.1%, respectively, in the same period.
Moreover, the ongoing holiday season might prove to be a dampener for UPS due to the unprecedented surge in demand. Order volumes have surged courtesy the rapid e-commerce growth. UPS, however, is also leaving no stone unturned to meet the demand increase.
Despite its efforts, high delivery costs might hurt the company’s fourth-quarter results. However, the Zacks analyst is encouraged by the company’s efforts to reward shareholders through buybacks and dividend payments. The company's efforts to expand globally also raise optimism in the stock.
PepsiCo’s shares have gained +12.2% year to date, underperforming the Zacks Soft Beverages industry, which has increased +13.9% over the same period. PepsiCo has been doing well on the back of significant innovation, continued momentum in Frito-Lay business, revenue management strategies, improved productivity and cost-saving initiatives, along with better market execution.
An improving economy, better industry pricing dynamics and consistency in positive innovation bode well. It rolled out several products recently which management believes will drive sales and profits in 2017. That said, growing health awareness has been hurting the CSD category, resulting in a 4% volume decline in the first nine months of 2017 in North America. Again, rising volatility in global markets and increasing currency headwinds may dampen growth.
Other noteworthy reports we are featuring today include AT&T (T), Costco (COST) and NextEra (NEE).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>